Thursday, 3 December 2015



  • In India, the Negotiable Act was passed during 1881 which came into force wef March 01,1881. (wef- With Effect from)
  • It has 147 sections and 17 Chapters (Section 138 to 142 were added in 1988 –wef April 01, 1989 and section 143 to 147 were added during December 2002).
  • The Act is applicable to entire India.
  • Negotiable Instrument (NI) has not been defined directly in the NI Act but as per section 13, an NI means and include promissory note, bill of exchange and cheque payable to order or bearer.
  • As per Indian Currency Act (Sec 21), a Currency Note is not a Negotiable Instrument.
Categories of Negotiable Instruments
As per the NI Act:
  • Promissory note (including certificate of deposit and commercial paper)
  • Bill of Exchange
  • Cheque
  • Demand Draft.
U/s 137 of Transfer of property Act:
The document of Title to goods are negotiable which include Bill of lading, Railway receipts, Dock warrant, Warehouse Receipt, GRs approved by IBA, Wharfinger certificate.These are also the document of title to goods under sale of goods Act.
Assignment of Negotiable Instruments
  • Negotiable Instruments can be either negotiated under NI Act or can be assigned under Transfer of property Act by following the given procedure for assignment.
  • The procedure of assignment being complex, the parties dealing with Nis adopt, the procedure of negotiation.
    Instruments payable to bearer by persons other than Central Govt.& RBI
  • RBI Act 1934 (Sec 31) states that in India, person RBI or central Govt. Can not draw, accept, make or issue any bill of exchange or promissory note (or demand draft) payable to bearer on demand.
  • Section 31(2) puts a restriction on making a promissory note payable bearer by a person other than RBI/ Central Govt.
Section 118 provides certain presumptions as to Nis, until the country is proved:
  • NI was made, drawn, accepted, endorsed and negotiated or transferred for consideration.
  • It bears the date on which it was made/drawn
  • It was accepted within a reasonable time after its date and before maturity
  • Transfer of Nis was made before maturity
  • Endorsement appearing on NI were made in the order in which they appear there on
  • It was duly stamped and stamp duly cancelled, when the NI stand lost
  • Holder is holder in due course.
  • The burden of proof that the instrument is contrary to all/any of the above presumptions, is with the person, who challenges such presumption.
  • More than one payee
  • An instrument can be made payable to two or more persons jointly or payable to one of two or one or some of several payees. (Explanation to section 13 NI Act).
Negotiability means transfer of the instrument to another person so as constitute him the holder.

Elements of Negotiation:
  • Further transfer without any restriction.
  • Transfer taking the instrument for value and in good faith, gets better and absolute title despite any defect in the title of the transfer (called endorser).
  • Negotiation of Bearer cheque (instruments) is completed by delivery (sec 47) and that of order cheque by delivery and endorsement (sec 48).
 Also read :

No comments:

Post a Comment